French gambling regulator determines that loot boxes are not legally gambling

They're a lot like gambling, and they're problematic, and something should be done—but they're not quite over the line.

The ongoing saga of loot boxes took an interesting turn last week when France's gambling regulatory body ARJEL weighed in with its 2017-18 activity report. The document addresses concerns about loot boxes, which came under increased scrutiny late last year, and states that microtransactions in videogames "are undermining public policy goals for gambling." It also called for some sort of combined European strategy to address the challenges posed by their growing ubiquity in mainstream videogames. But it also determined that from a legal perspective, loot boxes generally do not qualify as a form of gambling.

The report is in French, which complicates things somewhat; fortunately Sebastian Schwiddessen of Baker McKenzie shared an analysis of the report on LinkedIn.

ARJEL dismissed the argument that loot boxes don't qualify as gambling because they always provide something: More relevant, it said, is the fact that they rely on creating a feeling of a "near miss," similar to slot machines, which encourages players to keep trying. It also called on regulators in Europe, specifically the Gaming Regulators European Forum, to take collective action on loot boxes, including such things as clarifying the rules for game publishers and raising awareness among consumers—and particularly parents—of the potential risks they pose.

What it did not do, however, is rule that loot boxes fall within the legal definition of gambling. The primary reason for this is that items obtained through them have no real-world value. The Dutch ruled earlier this year that the existence of unofficial monetization platforms is enough to qualify loot boxes as a form of gambling (which is why Valve recently halted CS:GO and Dota 2 trading in that country), but ARJEL, Schwiddessen explained, excluded unsanctioned platforms from its decision, meaning that publishers who forbid the sale of in-game items in their terms of service, as most do, have their bases covered.

It's almost certainly not the final word on the matter. Schwiddessen described the position as "non-committal and unspecific," and ARJEL said it will continue to research loot boxes and microtransactions. But it does set a starting point: Regardless of the legal definition, loot boxes present challenges that, like conventional gambling, need to be addressed—and if loot boxes don't meet the current legal definition of gambling, then perhaps the relevant laws need to be updated. To that end, ARJEL will support a University of Bordeaux chair on gambling regulation in the online era, set to take place in early 2019.